GAO Says FCC Needs Better Oversight of Wireless Industry

A GAO report finds most Americans are generally satisfied with their wireless phone service, but early termination fees stop 42 percent of consumers who want a new carrier from switching providers. The Government Accountability Office survey also finds the FCC has focused on promoting competition, not consumer protection.

A Government Accountability Office study issued Dec. 10 (PDF) finds that 84 percent of Americans are very or somewhat pleased with their wireless phone service, but also concludes that early termination fees stop 42 percent of consumers who want a new carrier from switching providers.

The report also found that the Federal Communications Commission has conducted little oversight of services provided by wireless phone service carriers because the agency has focused on promoting competition, not consumer protection. The GAO said the FCC "may not be aware of trends or emerging issues related to consumer problems ... or if additional rules are needed to protect consumers."

The issue of ETFs has stirred up lawmakers since Verizon Wireless said it plans to double penalty fees to $350 for certain subscribers who leave their contracts early. Verizon customers purchasing a smartphone with a service agreement will be subject to an ETF of up to $350 if they disconnect service prior to the minimum term. The $350 ETF will decrease $10 for each month of service completed.

Sen. Amy Klobuchar responded Dec. 3 by introducing legislation to set limits on ETFs. 

The Cell Phone Early Termination Fee, Transparency and Fairness Act would prevent wireless carriers from charging an ETF that is higher than the discount on the cell phone that the company offers consumers for entering into a multiyear contract. For example, if a wireless consumer enters into a two-year contract and receives a $150 discount with the contract, the ETF cannot exceed $150.

The FCC on Dec. 4 also launched an inquiry into Verizon Wireless' ETFs.

"The GAO report shows that while most Americans are generally satisfied with their wireless service, which speaks well for the carriers, they also do not know where to turn when they have a problem they haven't been able to resolve with their carrier," said Rep. Rick Boucher, chairman of the House Subcommittee on Communications, Technology and the Internet. "The FCC should work with state utility commissions to educate consumers about how best to address these issues. My subcommittee will continue to monitor this issue closely."

CTIA, the major trade association representing the nation's largest wireless carriers, said in a statement it is pleased with the GAO report.

"We understand there may be some confusion over early termination fees. There are many choices available for consumers, including options that do not have any early termination fees, such as unsubsidized handsets without a contract and a prepaid plan that has no contract," said CTIA President and CEO Steve Largent. "More than 20 percent of American wireless consumers choose these options. After listening to their customers, carriers who serve more than 94 percent of the postpaid market have adopted prorated early termination fee policies."